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Effect of Demonetisation and Other Latest Economic Reforms in the Long Run

The latest demonetisation drive undertaken by the Government of India was launched by issuing a directive on November 08. Since then, speculations are flying high regarding the outcome of this momentous decision. Through this blog post, we will definitely voice our opinion on this issue but, before doing that it is important to take a swipe at some relevant hard facts.

The Backstage

Presently, India is a nation with a population of 125 crore, which is unbelievably huge by all means. According to simple math, our national GDP is expected to be U$ 2.3 trillion. However, out of 125 crore, only 4.5 crore Indians are tax payers. Out of this 4.5 crore, 1 crore clear away their taxes through TDS, as they are on payrolls of some organisation or the other. The rest of the huge population has literally nothing to do with the country’s taxation system.

In this backdrop, the union government rolled out the demonetization drive with intention to redress the issues of black money and parallel economy. Actually, these issues are depriving India to achieve the economic growth that she deserves.

The Impact

Now, the question is how this bold move going to impact the nation and her people in the long run? Both the Indian corporate and banking sectors are expected to come across inconveniences in the initial stages. Actually, the outstanding move has drained the market off liquid money and this cash crunch is bound to stall business activities at least for a little while. The great Indian consumer society, as a whole, is backing out from making instant purchases either online or offline. Everyone wants to hold on to their limited amount of cash till the problem blows over.

The duration of this inconvenience depends on a number of factors, which include how fast the:

Union government manages to introduce new currency-notes into circulation and

Country adapts itself to a cashless economy

Contributing to financial affluence

It is an undeniable fact that seizing black money is not the only way to boost our economy. In order to pave the road to financial affluence for the nation, our tax base should be spread further. According to speculation, a restructured GST (Goods and Services Tax) is most likely to be introduced by September 2017. Economists opine that a revised GST will also disrupt the country’s economy, affecting mostly the rural, unorganised and cash- based sectors.

It is an open secret that big players of black money in the country do not depend on hard cash. They rely on other smarter options like land, jewelry and of course, stacking money abroad in foreign banks. In spite of severe inconveniences that members of the public are facing as a result of demonetization drive, why is a democratically elected government is introducing such unprecedented measures?

Different people have different perspectives to look into this matter and as such, it is natural to have contrasting opinions on this age-defining decision. However, it cannot be denied that demonitisation drive will help the nation to prosper through attracting higher volumes of investment both from domestic and international business sectors in near future. It will also help to spread our tax net wider, along with lowering the nation’s fiscal deficit. Thus, in the end, the drive is expected to rot inflation and benefit the vast consumer society.

Development is never an overnight process and that too for a large nation like India, it is more like illusion. The brave steps undertaken by our current political leadership is expected to bear fruits for all in due time. Meanwhile, as a patriot and responsible citizen, everyone needs to hold some patience.